A widely used target: save 12-15% of gross income (including employer pension contributions) starting from your mid-20s. The Pensions and Lifetime Savings Association's Retirement Living Standards suggest single people need approximately £23,300/year for a moderate retirement and £37,300/year for comfortable. The full new State Pension provides £12,547/year (2026/27) — leaving a significant gap for most people's desired lifestyle. Time is the most powerful variable: starting at 25 versus 35 can mean contributing the same total amount but accumulating significantly more through compounding.
Retirement saving is the financial goal with the longest time horizon and the most power from compounding — which makes starting early one of the highest-impact financial decisions anyone can make. The challenge is that the consequences of starting late feel very remote when you're 25 and retirement feels abstract.
Why Starting Early Matters So Much
A straightforward illustration of compounding's power: someone saving £250/month from age 25 to 65 at 5% average annual growth accumulates approximately £375,000. Someone saving the same £250/month but starting at age 35 accumulates approximately £208,000 — £167,000 less from the same monthly contribution, simply because they started 10 years later.
The extra 10 years don't add 10 years of contributions — they add 10 years of growth on everything previously saved. This is why even small amounts saved early are disproportionately valuable compared with larger amounts saved later.
How Much Is Enough?
Target figures depend on your lifestyle ambitions, life expectancy, and other income sources. The PLSA (Pensions and Lifetime Savings Association) Retirement Living Standards provide useful benchmarks:
- Minimum standard (covers basic needs): approximately £14,400/year single, £22,400/year couple
- Moderate standard (some luxuries, one holiday/year): approximately £23,300/year single, £34,000/year couple
- Comfortable standard (more financial freedom and flexibility): approximately £37,300/year single, £54,500/year couple
The full new State Pension in 2026/27 is £241.30/week (£12,547/year). This provides a foundation but leaves most people significantly short of even the moderate standard — meaning personal pension and ISA savings need to fill a meaningful gap.
A Practical Rule of Thumb
A commonly used target: take your age when you start saving and halve it. Put that percentage of gross salary into pensions each year. Start at 30? Save 15%. Start at 40? Save 20%. This rough guide captures the increasing urgency of catching up when starting later.
Including employer pension contributions: the minimum auto-enrolment combined contribution is 8% of qualifying earnings. For most people this is not enough for a comfortable retirement — particularly those who started a workplace pension late or have gaps from career breaks or self-employment periods.
Auto-Enrolment: The Starting Point
Workplace pension auto-enrolment requires minimum combined contributions of 8% of qualifying earnings (employee + employer). This provides a foundation but for most people isn't sufficient for a comfortable retirement. Voluntarily contributing more — particularly through salary sacrifice to also save NI — is worth prioritising alongside other financial goals.
For how pensions and ISAs work together for retirement planning, our article on pension vs ISA for retirement covers when each is most appropriate.
Frequently Asked Questions
Is it too late to start saving for retirement at 45 or 50?
No. Starting later means saving more aggressively, but compounding still works meaningfully over 15-20 years. A 50-year-old who maximises pension contributions from that point can still build a substantial pot. Tax relief makes every £100 contributed cost only £60 for a higher-rate taxpayer.
What's the pension annual allowance?
You can contribute up to £60,000 or 100% of earnings per year (whichever is lower) across all pension types combined, and receive tax relief on contributions. This is a generous limit that most people won't approach.
For pension projections, MoneyHelper's pension calculator helps model expected income at retirement based on your current contributions.
